ETFs listed in the United States are traded on an American stock exchange, such as the New York Stock Exchange, in the same way as ETFs listed in Canada are traded on the TSX (NYSE). Indeed, Canadian investors can find ETFs from similar providers such as Vanguard and iShares that are listed in the United States. A Canadian investor just has to open an account with a bargain brokerage like Questrade or Wealthsimple Trade to access (or invest in) a U.S.-listed ETF. You’ll be able to trade stocks and ETFs on both the Canadian and American stock exchanges from there.
While this is a straightforward method of purchasing ETFs listed in the United States, it is not the most cost-effective. This is because ETFs listed in the United States trade in US dollars, whereas a Canadian investor is more likely to utilize Canadian dollars. Any discount broker, such as Questrade, will execute your deal, convert your currency, and charge a fee (usually 2.5 percent) on top of that. If you’re making a large trade, those costs might soon pile up.
Instead, Canadian investors who want to trade ETFs listed in the United States need open a USD investing account and fund it with their own dollars. You can avoid additional costs from your broker when converting CAD to USD this way because you’re trading in the same currency (or vice versa).
What is the best US ETF for Canadian investors?
VFV invests in the largest-capitalization stocks in the United States and tracks the performance of the S&P Index.
Since its debut, this fund has averaged a 17.08 percent annual return (October 31, 2020).
Can I invest in US exchange-traded funds (ETFs)?
If your platform permits so-called sophisticated investors to buy US-domiciled ETFs, you may have an exception. If you can show that you are a professional investor or otherwise highly qualified with the knowledge and experience to appreciate the product’s risks, you may be eligible.
In Canada, how are American ETFs taxed?
Capital gains are taxed at a rate of 50% in Canada and must be included in the investor’s taxable income. The holder will be taxed on the reinvested distributions in the year they are received. Furthermore, a reinvested distribution will raise the holder’s total ACB of their ETF units retained.
In Canada, how do I purchase Vanguard ETF?
What are the options for purchasing Vanguard Canada ETFs and mutual funds? Vanguard ETFs can be purchased through a financial advisor or through an online brokerage account. With the guidance of a financial advisor, you can purchase Vanguard mutual funds, or verify availability with an online brokerage business.
Are ETFs in the United States Ucits-compliant?
When PRIIPs and MiFID II rules went into effect at the beginning of 2018, European-domiciled UCITS ETFs were ready with their new KIDs. US-domiciled ETFs, on the other hand, did not comply, and because they primarily serve the US market, creating EU-approved information at their own expense is not a priority for them.
Is there a withholding tax on US exchange-traded funds?
The withholding tax of 15% will be applied initially by the nation from which the stock originates. The US charges an extra withholding tax on distributions made by the US ETF to Canadian taxpayers after the first 15% is deducted. This supplementary withholding tax, which applies to non-registered accounts, can be as high as 15%.